Compare Your Options As a new Colorado community college employee, you may select from two types of retirement plans offered by Colorado PERA. Whether you are comfortable investing for your retirement or would like professionals to invest on your behalf, Colorado PERA has an option for you. What is Colorado PERA? Colorado PERA was established in 1931 by the Colorado General Assembly, at the request of a group of State employees who foresaw the need for a safe and secure retirement system. PERA pre-dates the creation of Social Security, and as a community college employee, you do not contribute to that system, although workers hired after March 1986 contribute 1.45 percent of their pay to Medicare. Colorado PERA serves over 400,000 public employees today. The PERA trust funds exceed $40 billion and are invested in Colorado and companies around the world on behalf of the PERA membership. PERA is governed by a 15- member Board of Trustees, 11 of whom are elected by the membership. The Board works closely with your elected officials to ensure the soundness of the State s largest financial institution. What Plans Does PERA Offer? Colorado PERA has two types of plans a defined benefit ( DB plan ) and a defined contribution ( DC plan ) available for eligible new community college employees. The DB plan is the traditional retirement plan, where your contributions are invested by professionals for you. In the DC plan, you direct your investments to an array of fund options. Eligibility Requirements Employees hired on or after January 1, 2008, at the institutions listed at the right may be eligible to participate in PERAChoice. If PERA has received contributions on your behalf from you and another PERAaffiliated employer in the last 12 months you cannot participate in PERAChoice and must return to the plan in which you previously participated. PERA retirees are not eligible to participate. If PERA has not received contributions on your behalf in the past 12 months, and you are not a PERA retiree, you are eligible to participate in PERAChoice. Community colleges eligible to participate in PERAChoice: Arapahoe Colorado Community System Colorado Northwestern of Aurora of Denver Front Range Lamar Community Morgan Community Northeastern Junior Otero Junior Pikes Peak Pueblo Community Red Rocks Trinidad State Junior Personal. Innovative. Secure. 5/112a (REV 12-07) 1 www.copera.org
Making the Decision DB or DC The PERA DB retirement plan is a hybrid defined benefit plan. It is designed to attract and retain employees who are interested in working in PERA-covered employment for a large part of their careers, while providing greater portability than a traditional defined benefit plan. Unlike the PERA DB Plan, the PERA DC Plan plan is based solely on the money you have contributed, the investment earnings or losses incurred, minus expenses. You have the flexibility to make investment decisions, which also means you assume the investment risks. The amount of your benefit can sometimes be difficult to determine given that the amount depends on the success of your investment decisions, when you begin withdrawals, and your life expectancy. Over the years, PERA has worked with the State Legislature and others to address issues such as portability, cost of living adjustments, and overall improvement of the benefits PERA members receive. These changes have made the PERA DB plan more flexible and portable. PERA members and the State of Colorado benefit from a conservative yet innovative approach to public pension management. The PERA DB and PERA DC Plans are both considered 401(a) plans and are created under that section of the Internal Revenue Code. Defined Benefit Plan Features Lifetime retirement benefit Ancillary benefits such as disability and survivor coverage Plan invests for all beneficiaries, and individual contributors do not control the amount of their contributions nor their investments Also known as a traditional pension plan Defined Contribution Plan Features The retirement benefit equals the amount accumulated in the account over time and the benefit ends when the account balance is depleted Employees contribute to a tax-deferred plan, making their own investment decisions Employees have their own unique accounts Plan type generally labeled according to the governing section of the Internal Revenue Code, such as 401(k), 403(b), 457, or a 401(a) plan Personal Investment Assessment By answering the following questions, you ll be better able to determine what type of plan (DB or DC) is right for you. Do you like to manage your own investments? Yes No If you answered Yes, consider PERA DC. If you answered No, consider PERA DB. Do you have the time and knowledge to appropriately invest for your retirement security? Yes No If you answered Yes, consider PERA DC. If you answered No, consider PERA DB. Do you have dependents that rely on you for financial support? Yes No If you answered Yes, consider PERA DB since your contribution includes survivor benefits and disability coverage. If you answered No, consider PERA DC. Are you still unsure of what type of plan to choose DB or DC? Yes No If you answered Yes, keep in mind that after a year of contributing to either the PERA DB or PERA DC plan, you can change your mind and switch plans between years 2 and 5. If you answered No, complete the PERAChoice Election and Release Form in this packet within 60 calendar days of your date of hire to start investing in your future. (After 60 days, you ll be automatically enrolled in PERA DB.) 2
Defined Benefit Plan As the premier Defined Benefit plan available to public employees in the State of Colorado, PERA has served Colorado public employees since 1931. An Internal Revenue Code Section 401(a) hybrid defined benefit plan, PERA operates as a qualified retirement plan and for most members serves as a substitute for Social Security. (PERA began before Social Security was created. In 1951, public employers could join Social Security; the Colorado Legislature decided to continue the PERA program instead of joining Social Security.) Currently, more than 187,000 employees of state government, public schools, universities and colleges, and many cities and local government districts are active members of PERA, and more than 400 Colorado public employers are affiliated with PERA. In addition, PERA pays benefits to more than 75,000 retirees and other recipients, 87 percent of whom live in Colorado. PERA also provides its members and retirees with a comprehensive benefit package that includes the following: Lifetime retirement benefits, which can continue to a cobeneficiary after your death Good portability provisions Tax-deferred interest (currently 5 percent) on member contributions Comprehensive survivor and disability benefits Annual cost-of-living increases in retirement benefits Access to PERACare retiree health care, including dental and vision plans Ability to invest in a voluntary 401(k) plan Access to voluntary life insurance and long term care insurance programs Did you know that as a PERAChoice participant you will have the one-time option of switching between the PERA DB and DC Plans? Between years two and five you can change your mind and end participation in one plan and begin participation in the other plan. PERA Benefits At A Glance... The Advantages of Membership in PERA Your PERA contributions of 8 percent are tax deferred, which means reduced current state and federal income taxes. You earn a fixed interest rate on your member contributions (currently 5 percent compounded annually). The rate is set by the Board and is subject to change annually. You receive a matching amount equal to 50 percent of your contributions and interest if you withdraw your account before retirement eligibility or age 65, or, receive a 100 percent match if you withdraw your account after retirement eligibility or age 65. Your qualified survivors will be provided a monthly benefit, between 25 percent and 50 percent of your pay, if you die after earning one year of service. Your beneficiary will receive a lump-sum payment of your contributions, applicable interest, and a 100 percent match if no monthly benefits are payable. You receive a lifetime retirement benefit after meeting age and service requirements (minimum age 55). You receive benefits equal to 2.5 percent of your average highest three years of salary for each year of service up to 100 percent. 3 Personal. Innovative. Secure. www.copera.org
PERA Defined Benefit Option Even if you are a Colorado PERA member for only a short period of time during your career, your PERA membership is valuable to you. The following example illustrates how over a period of time, a PERA account will grow with compounded interest. The example below uses Jim, a PERA member who earned five years of PERA service credit before terminating employment at age 30. Jim s annual salary was $30,000, with 3.5 percent raises per year. (Note: The refund and benefit amounts assume a 5 percent interest rate per year. The interest rate is set by the PERA Board and is subject to change annually.) Account Balance Each Year with 5 Percent Compounded Interest Age Account Balance 30 $14,552 35 $18,572 40 $23,703 45 $30,252 50 $38,610 55 $49,278 60 $62,892 When Jim terminated employment, he had an account balance of $14,552 (member contributions and interest accumulated at 5 percent compounded annually for five years). Jim has the option to withdraw his account as a lump sum when he terminates PERA-covered employment or leave it until he reaches retirement age. The amount of Jim s refund, should he choose to withdraw his account prior to retirement eligibility, would be his account balance of $14,552 plus a 50 percent match, for a total refund of $21,828. Jim also has the option of leaving his account with PERA, where it will continue accruing interest. At age 60, because he would be eligible for a retirement benefit, he would be eligible for a 100 percent match on his account balance and he could choose to withdraw the account or receive a lifetime monthly benefit. At age 60, Jim s account will have grown from $14,552 to $62,892 as a result of compounding over a 30-year period. With a 100 percent match, his refund amount as a lump-sum distribution would be $125,784. At age 60, if Jim were to choose to receive an Option 1 lifetime monthly benefit, which is calculated by projecting his account balance over his expected life span, his benefit amount would be $745 per month. Please note: Lump-sum distributions from the Plan will be subject to 20 percent federal tax withholding and, if you are less than age 59 1 / 2, a 10 percent early withdrawal penalty will apply. Ordinary income taxes may apply. State and local taxes and withholding may also apply. Further, most PERA members do not contribute to Social Security, so if an account is refunded, retirement savings for that period of employment are gone. PERA Defined Benefit Table Find the percentage in the block where age intersects with years of service. Multiply your Highest Average Salary (HAS) by that percentage. HAS is one-twelfth of the average of the highest annual salaries on which PERA contributions were paid that are associated with three periods of 12 consecutive months of service credit. Credit is earned for each month. Highest Average Salary Percentages for Retirement Benefit Option 1 For Members Hired on or After January 1, 2007 Years Age at Retirement of Service 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65+ 5 10.0 10.5 11.0 11.5 12.0 12.5 6 12.0 12.6 13.2 13.8 14.4 15.0 7 14.0 14.7 15.4 16.1 16.8 17.5 8 16.0 16.8 17.6 18.4 19.2 20.0 9 18.0 18.9 19.8 20.7 21.6 22.5 10 No retirement 20.0 21.0 22.0 23.0 24.0 25.0 11 benefits 22.0 23.1 24.2 25.3 26.4 27.5 payable. 12 24.0 25.2 26.4 27.6 28.8 30.0 13 26.0 27.3 28.6 29.9 31.2 32.5 14 28.0 29.4 30.8 32.2 33.6 35.0 15 30.0 31.5 33.0 34.5 36.0 37.5 16 32.8 33.6 35.2 36.8 38.4 40.0 17 35.7 36.6 37.4 39.1 40.8 42.5 18 38.7 39.6 40.5 41.4 43.2 45.0 19 41.8 42.8 43.7 44.7 45.6 47.5 20 42.5 43.0 43.5 44.0 44.5 45.0 46.0 47.0 48.0 49.0 50.0 21 45.4 46.2 46.7 47.3 47.8 48.3 49.4 50.4 51.5 52.5 52.5 22 48.4 49.2 50.1 50.6 51.2 51.7 52.8 53.9 55.0 55.0 55.0 23 51.5 52.3 53.2 54.1 54.6 55.2 56.4 57.5 57.5 57.5 57.5 24 54.6 55.5 56.4 57.3 58.2 58.8 60.0 60.0 60.0 60.0 60.0 25 43.8 46.6 49.4 52.2 55.0 57.8 58.8 59.7 60.6 61.6 62.5 62.5 62.5 62.5 62.5 62.5 26 45.5 49.4 52.3 55.3 58.2 61.1 62.1 63.1 64.0 65.0 65.0 65.0 65.0 65.0 65.0 65.0 27 47.3 51.3 55.4 58.4 61.4 64.5 65.5 66.5 67.5 67.5 67.5 67.5 67.5 67.5 67.5 67.5 28 49.0 53.2 57.4 61.6 64.8 67.9 69.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 29 50.8 55.1 59.5 63.8 68.2 71.4 72.5 72.5 72.5 72.5 72.5 72.5 72.5 72.5 72.5 72.5 30 52.5 57.0 61.5 66.0 70.5 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 31 58.9 58.9 63.6 68.2 72.9 77.5 77.5 77.5 77.5 77.5 77.5 77.5 77.5 77.5 77.5 77.5 32 65.6 65.6 65.6 70.4 75.2 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 33 72.6 72.6 72.6 72.6 77.6 82.5 82.5 82.5 82.5 82.5 82.5 82.5 82.5 82.5 82.5 82.5 34 79.9 79.9 79.9 79.9 79.9 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 35 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 87.5 The shaded areas indicate reduced service retirement percentages. For 35+ years, add 2.5 percent to 87.5 for each year over 35 up to 100 percent. Final calculations are made to the exact amount of service you earn, not necessarily even years. This publication provides general information about DB/DC Plans. PERA membership rights, benefits, and obligations are governed by Title 24, Article 51 of the Colorado Revised Statutes, and the Rules of the Colorado Public Employees Retirement Association, which take precedence over any interpretations in this publication. 4
Defined Contribution Plan You can choose from a variety of low-cost, top-ranked funds in the Colorado PERA DC Plan. Remember that the key to successful investing is diversification, and in the Colorado PERA DC Plan, you have the ability to select your own funds based on your personal tolerance for investment risk, or you may select a lifestyle fund in which your fund allocation is done for you based on your anticipated retirement date. Setting Up Your Account You must set how your future contributions will be invested. To do this, go to www.copera.org and click on DC Plan Asset Allocation. If you do not do this, your money will automatically be invested in the Northern Trust Short Term Fund. Web Site and Customer Service Center Most Plan transactions and information requests can be made 24 hours a day, 7 days a week by accessing the DC Plan site through the PERA Web site at www.copera.org (click on Account Access) or by calling 1-800-759-7372 and selecting the DC/401(k) option. In each case, DC account access requires your Social Security number and PIN. Participant Service Representatives You may also speak with a Participant Service Representative any business day between 6:00 a.m. and 6:00 p.m. (Mountain time), excluding New York Stock Exchange holidays. You must use your PIN to get your account information from a Participant Service Representative. Quarterly Account Statements Every quarter, you will receive an easy-to-read statement that summarizes your account status, including your account balance, investment selections, and the current value of each investment. Or, if you d prefer, you can generate a customized statement at any time on the DC Plan Web site. Voluntary Plans You have the option of enrolling in several voluntary plans including PERA s life insurance, long term care, and health care program. You may also join PERA's 401(k) plan, which allows you to make additional contributions to the same investment options as the DC Plan and you have access to loans and hardship withdrawals from your 401(k) money. Distributions When Terminating PERA-Covered Employment When you leave PERA-covered employment, you have several choices regarding the money in your DC Plan account: You can leave the money in the Plan. You must start distributions once you reach age 70 1/ 2. You can request installment payments. You can roll over the balance to another qualified plan, 403(b), governmental 457 plan, or an IRA. You can take the money in cash, called a lump-sum distribution. Distribution choices and rules are complicated. You are encouraged to talk with your tax adviser or financial planner before deciding how to take your distribution. Note: Lump-sum distributions from the Plan will be subject to 20 percent federal tax withholding and, if you are less than age 59 1/ 2, a 10 percent early withdrawal penalty will apply. Ordinary income taxes may apply. State and local taxes and withholding may also apply. 5 PERA DC Choice Vesting Schedule Your Contributions 100% Immediately* Your Employer s Contributions 50% Immediately* 60% After 1 year* 70% After 2 years* 80% After 3 years* 90% After 4 years* 100% After 5 years* *Plus/minus investment gains/losses, minus fees Personal. Innovative. Secure. www.copera.org
Fees* Administrative and recordkeeping fees will be charged directly to your account. Administrative fees are charged directly to participants on a monthly basis based on the participant s account balance as shown on the table at right. Each investment fund charges an investment management fee, which participants pay directly by having the fee deducted from the investment fund s return. Fees for each fund are listed in the Investment Funds Available table on the next page. You may also obtain fee information on the DC Plan Web site or by calling 1-800-759-7372 and selecting the DC/401(k) option. * All fees subject to review and change Account Balance Monthly Fee Total Fee Per Year $ 0 $ 25,000 $2.00 $24.00 $ 25,000.01 $ 50,000 $2.25 $27.00 $ 50,000.01 $ 75,000 $2.50 $30.00 $ 75,000.01 $100,000 $2.75 $33.00 $100,000.01 $125,000 $3.00 $36.00 $125,000.01 or greater $3.25 $39.00 Types of Investments If you choose to participate in PERA s DC Plan, you have a variety of investment options to choose from. The table below explains the four main investment classes available to you. When building your portfolio, keep in mind your goals, risk tolerance, and time horizon for retirement. And remember, neither diversification nor asset allocation ensures a profit or guarantees against a loss. Description Benefits Risks Short-Term Funds Short-term funds are generally made up of money market investments, certificates of deposit (CDs), and U.S. Treasury Securities. Short-term funds offer a high degree of security, designed to protect your original investment or principal. Short-term funds don t offer the income potential of bond funds or the growth potential of stock funds, so they may not keep pace with inflation over time. Bond Funds Bond funds invest in many individual government and corporate bonds. Bond funds generally earn interest, which is also referred to as income or yield. Bond funds generally offer greater income potential than short-term funds and not as much risk as stock funds. Typically, bond funds don t offer the growth potential of stock funds and are riskier than the short-term funds. Stock Funds Stock funds offer different investing strategies, ranging from conservative to aggressive, with varying degrees of risk and return potential. Stock funds invest in many different individual stocks. Historically, stocks have provided larger long-term gains than other asset classes. The value of stocks can go down over short periods of time. As a result, there is greater risk to your savings, including your principal, compared to other asset classes. Lifestyle Funds Lifestyle funds invest in a combination of all asset classes. One lifestyle fund provides your portfolio with adequate diversification and reduced exposure to market risk for the long term. Lifestyle funds are designed to automatically make your investment allocation decisions for you based on your planned retirement date. During the early years of your career, these funds invest more heavily in stock funds, which carry greater risk. As you near retirement, these funds automatically shift to an asset mix which has less risk. 6
Risk Spectrum The graphic below features the funds that are available in the DC and 401(k) Plans. As you move along the spectrum from left to right, the greater the risk to your principal, but also the greater potential reward. Lower Risk Short Term Bonds Northern Trust Short Term PIMCO Low Duration Freedom Income PIMCO Total Return Freedom 2000 Freedom 2010 Investment Funds Available Northern Trust Short Term Fund Newspaper Symbol: None Ticker Symbol: None Investment Fee: 0.22% PIMCO Low Duration Fund Newspaper Symbol: PIMCO Fds Inst I PIMS: LowDur Ticker Symbol: PTLDX Investment Fee: 0.43% PIMCO Total Return Fund Newspaper Symbol: PIMCO Fds Inst I PIMS: TotRt Ticker Symbol: PTTRX Investment Fee: 0.43% Dodge & Cox Balanced Fund Newspaper Symbol: Dodge & Cox BalanN Ticker Symbol: DODBX Investment Fee: 0.52% Vanguard Institutional Index Fund Newspaper Symbol: VANGUARD INSTL FDS: Instldx Ticker Symbol: VINIX Investment Fee: 0.05% Dodge & Cox Stock Fund Newspaper Symbol: Dodge & Cox: Stock Ticker Symbol: DODGX Investment Fee: 0.52% PERA Growth & Income Fund Newspaper Symbol: None Assets are managed by PERA s investment staff Ticker Symbol: None Investment Fee: 0.30% Fidelity Contrafund Newspaper Symbol: Fidelity Invest: Contra Ticker Symbol: FCNTX Investment Fee: 0.90% Balanced Dodge & Cox Balanced Stocks Freedom 2020 Freedom 2030 Freedom 2040 Vanguard Institutional Index Dodge & Cox Stock PERA Growth & Income Fidelity Contrafund GMO U.S. Growth EuroPacific Growth GMO U.S. Growth Fund Newspaper Symbol: USG-M Ticker Symbol: GMWMX Investment Fee: 0.77% American Funds EuroPacific Growth Fund Newspaper Symbol: American Funds CL R5: Eupac Ticker Symbol: RERFX Investment Fee: 0.58% Vanguard Small Cap Index Fund Newspaper Symbol: SmCapAdml Ticker Symbol: VSCIX Investment Fee: 0.08% Fidelity Freedom Income Fund Newspaper Symbol: Income Ticker Symbol: FFFAX Investment Fee: 0.51% Fidelity Freedom 2000 Fund Newspaper Symbol: FF2000 Ticker Symbol: FFFBX Investment Fee: 0.52% Fidelity Freedom 2010 Fund Newspaper Symbol: FF2010 Ticker Symbol: FFFCX Investment Fee: 0.62% Fidelity Freedom 2020 Fund Newspaper Symbol: FF2020 Ticker Symbol: FFFDX Investment Fee: 0.70% Fidelity Freedom 2030 Fund Newspaper Symbol: FF2030 Ticker Symbol: FFFEX Investment Fee: 0.74% Fidelity Freedom 2040 Fund Newspaper Symbol: FF2040 Ticker Symbol: FFFFX Investment Fee: 0.76% 7 Higher Risk Vanguard Small-Cap For more information, call PERA s Customer Service Center at 303-832-9550 or 1-800-759-7372. Information about PERA s DB and DC Plans is also available online at www.copera.org.